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Ethical Companies: Pillars for business ethics

What is an ethical company?

We have already talked about the reasons why should a company be ethical and moral. Broadly speaking, a truly ethical company will be one that is not causing damage to the environment, exploiting its workforce by paying low wages, using child labour, or producing products which are harmful or dangerous. Two sets of criteria – one positive, one negative – have been developed to identify ethical investments.

Positive criteria

On the positive front, there are two types of approaches. The first is known as best of class.

Take pollution, for example. Very few companies could be included in an ethical fund if they were required to have a 100% clean sheet in this regard. However, the best-of-class method would choose a company that had an excellent and improving pollution record.

The second positive method is a thematic investment. This focuses on companies that are believed to be improving the world. They will be industries of the future with growth potential and may be involved in activities such as reusable energy, education, health care, telecommunications, or public transport.

Negative criteria

The Ethical Investment Research Service (EIRS) has produced a set of negative criteria.

The EIRS is a charity that screens companies on behalf of other charities and fund managers. Ethical fund managers will select from the various positive and negative criteria in deciding what to include and exclude from their portfolio. Some funds are more ethical than others.

Negative criteria might cover arms and armaments, companies which produce tobacco or alcohol, and companies that have a poor record on pollution control. Different fund management use this information to draw up their own portfolios.

Pillars of an Ethical Culture

Creating an ethical culture thus requires thinking about ethics not simply as a belief problem but also as a design problem. Harvard Business Review identified four critical features that need to be addressed when designing an ethical culture: explicit values, thoughts during judgment, incentives, and cultural norms.

Explicit values

Strategies and practices should be anchored to clearly stated principles that can be widely shared within the organization. A well-crafted mission statement can help achieve this, as long as it is used correctly. Leaders can refer to it to guide the creation of any new strategy or initiative and note its connection to the company’s principles when addressing employees, thus reinforcing the broader ethical system. Employees should easily be able to see how ethical principles influence a company’s practices. They’re likely to behave differently if they think the organization is being guided by the ethos of Mr. Rogers, the relentlessly kind PBS show host, versus that of Gordon Gekko, the relentlessly greedy banker in the film Wall Street.  Even well-meaning people are more ethically malleable than one might guess.

Thoughts during judgment

Most people have less difficulty knowing what’s right or wrong than they do keeping ethical considerations top of mind when making decisions. Ethical lapses can therefore be reduced in a culture where ethics are at the center of attention. You might know that it’s wrong to hurt someone else’s chances of being hired but fail to think of the harm you cause to unknown applicants when trying to help a friend, a family member, or a business school classmate land a job. Behavior tends to be guided by what comes to mind immediately before engaging in an action, and those thoughts can be meaningfully affected by context. Should someone remind you that helping a friend necessarily hurts the chances of people you don’t happen to know, you might think twice about whether your advocacy efforts are appropriate. Incentive programs must provide a variety of rewards to be effective.

Incentives

It is a boring truism that people do what they’re incentivized to do, meaning that aligning rewards with ethical outcomes is an obvious solution to many ethical problems. That may sound simple (just pay people for acting ethically), but money goes only so far, and incentive programs must provide a variety of rewards to be effective.

Along with earning an income, employees care about doing meaningful work, making a positive impact, and being respected or appreciated for their efforts.

Cultural norms

Most leaders intuitively recognize the importance of “tone at the top” for setting ethical standards in an organization. Easily overlooked is “tone in the middle,” which may actually be a more significant driver of employees’ behavior. Good leaders produce good followers; but if employees in the middle of the organization are surrounded by coworkers who are lying, cheating, or stealing, they will most likely do the same, regardless of what their bosses say. So-called descriptive norms—how peers actually behave—tend to exert the most social influence.

World’s most ethical companies 

The Ethisphere Institute is an American company that defines and measures business ethical standards, recognizes companies that excel, and promotes best practices in business ethics. The recognition program was launched In 2006 by Ethisphere launched the World to measure and show the superior achievements of organizations that work with ethics and integrity. 

The evaluation is carried out by analyzing the following aspects of each company:

World Most ethical companies

The evaluation process is rigorous and objective. It includes a 200-point assessment, documentation review, and research into an organization’s reputation and ethical practices. 

The process itself provides a way for organizations to assess their own programs against leading practices.  Ethisphere also shares the World’s Most Ethical Companies data to help all organizations understand and improve programs.

Here you can find all the nominated companies of 2021: https://worldsmostethicalcompanies.com/ .

At ITL Group, we believe that Ethics should be a priority for every company because we should “leave a footprint to inspire generations to come”.

Daniele Perinelli

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